Why Waste Management Insider Selling May Have Been No Big Deal

Also, more IDT idiocy, a philosophical chat and <I>TheStreet.com</I> meets TV.
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Monday Malaise:

Old news, no?:

The

WSJ

may be too offline to follow

TheStreet.com

, but if they had been reading they would've seen that this column on Wednesday

mentioned fortuitous insider selling at

Waste Management

(WMI)

. That was two days before the

WSJ

led

its entire newspaper with the very same story. (That's NEWS, and I hate to sit on NEWS, so we ran it in a midday column, which of course is why it pays to keep checking

TheStreet.com

throughout the business day.) The news in question was the sale of shares by insiders, including the company's prez, who dumped a big chunk of his holdings prior to the company's disclosure last week that its earnings would be far below expectations.

While on the subject: The point of

that

item and the

WSJ

story was that it appeared Waste Management insiders might have been getting out while the getting was good. Waste Management stock plunged when the news was disclosed. But a spokeswoman, whom I couldn't reach Wednesday, told the

Journal

that this window was the first chance insiders had to sell since 1996. And I also received this comment from insider trading maven George Muzea, of

Muzea Insider Consulting

:

Please be careful when you imply that the insiders of a specific company knew that bad news was coming. If this was so, and if it could be proven, then insider-trading rules would have been violated and these insiders would have been subjected to severe penalties. I do not believe the selling insiders knew about the revenue shortfall. I believe they sold their option-related shares as part of ongoing selling plans that they consider management compensation. Most of the sellers, including the president, either increased or maintained ownership positions. Furthermore, if bad news was coming and they knew, then how do you explain the fact that Director Ralph Whitworth bought 686,000 shares in September 1998, increasing his holdings to 1,186,000 shares, and has not sold a share? Wouldn't it be logical for a director with this much stock to know if bad news was coming?

You would think. Thanks, George.

More IDT-idiocy:

The mail keeps pouring in, but one comment I keep getting is that investors in

IDT's

(IDTC)

soon-to-be-public

Net2Phone

subsidiary, such as

AOL

(AOL)

,

GE Capital

and

Softbank

, certainly must've done

their

due diligence. So must have

Bankers Trust

,

CIBC World Markets

and

Lehman Commercial Paper

, which recently underwrote $150 mil in commercial paper for a bond buyback for IDT. So must have

Hambrecht & Quist

,

Deutsche Banc Alex. Brown

and

Bear Stearns

, which are the underwriters for the upcoming IPO.

To which I say: You would think. But think back to the IPO insanity of the mid-1990s, when bankers were so busy doing so many deals that due diligence (many of them will admit) was a joke. Go back and look at my

Media Vision

stories in the

SF Chronicle

. (Media Vision since went bankrupt, and its former CEO has been indicted for securities fraud.) This was one of the hottest deals (and subsequent stocks) of its day, but after the company blew up, it became clear that its investment bankers and even venture capitalists didn't do simple background checks on the CEO that would've kept any sane investor away from the company.

I am not saying history is repeating itself, but it's one of the lessons I carry with me and it's one reason I trust nobody. Nobody! Short-sellers and other sources often pass along snippets of this and snippets of that from public documents. I then go back, on my own, and review the whole document. Or ask for copies if they're not easily available.

Even good sources have been known to leave out, or overlook, pertinent details. I'm always amazed at how many of my very best sources fail to read the proxy, which is the first document I turn to because it shows how much the execs are paid (is it egregious?); who is on the board (is it the old boys network?); and what kind of related party transactions involving board members are disclosed (too close for comfort?). Sets the tone for the type of company you're dealing with.

Reader

Subodh Nijsure

wonders what process I go through when I do a story on a company like IDT. It varies from company to company, but in the case of IDT, after reviewing the documents, I simply called the company. I have public disclosures that raise questions, and it's the company's job to explain them. Simple as that.

Unbelievable how many IDT-iots accuse me of printing innuendo when, in fact, I was dealing with fact. And asking questions

every

investor should've been asking. Can't accuse

IDT

of not disclosing its loan to

Lermer Overseas Telecommunications

(which didn't technically exist) at a low 5%.

Investors

should be accused of not inquiring about it. One IDT-iot actually wondered how I knew the loan was 5%.

Because it was in the 10-K!

Oh, and why do I continue to waste precious space printing some of my emails: Because, from time to time it's important to show the character and cult of investors behind some of these stocks. Reader

Andrew Boord

put it best when, after reading some of my IDT-o-grams, he wrote: "Your job is like trying to cure those who don't believe they are sick."

Which leads to one other thing: Libel on message boards is a serious issue. My being a journalist doesn't give

anybody

a license to print lies about me,

JJC

or any other journalist. You should see some of 'em; They're doozies. And if you think JJC and I are in cahoots, go back and read

his

recent comments on the subject.

Fox fantasies:

Yep,

Brenda B.

,

Gary B.

, me, JJC,

Lashinsky

,

Kansas

and a cast of not-quite-thousands from

TheStreet.com

debut (can you figure out the odd man out in that listing?) when "TheStreet.com" premieres on the

Fox News Channel

this Saturday at 10 a.m. EDT, with a repeat Sunday at 1 p.m. EDT. Rehearsals are going great. If your cable company doesn't get the

Fox News Channel

, start harassing them NOW!

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.